Income Taxes |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | Note 6. Income Taxes
For the three months ended March 31, 2026 and 2025, we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for income taxes.
We recognized a provision for income taxes of $7 and $5 for the three months ended March 31, 2026 and 2025, respectively. While the effective tax rate for the three months ended March 31, 2025 was not meaningful, the effective tax rate for the three months ended March 31, 2026 was (32)%.
There was a $2 increase in our provision for income taxes for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025; however, our provision for income taxes for the three months ended March 31, 2026 was primarily impacted by our geographic mix of earnings, profit in inventory, a continued build in US federal, state, and foreign valuation allowances, as well as certain legal accruals deemed non-deductible for tax purposes. These were offset by a foreign derived deduction eligible income tax benefit. Our provision for the three months ended March 31, 2025 was primarily impacted by mix of earnings, a build in valuation allowance against certain state net operating losses and deferred tax assets, and profit in inventory.
The Company continues to record any changes and impacts of the Organization for Economic Co-operation and Development Global Anti-Base Erosion Model Rules (“Pillar Two”) in the quarter, which was overall not material to the Company’s effective tax rate.
As of March 31, 2026, the Company continues to record valuation allowances against certain deferred tax assets in various jurisdictions. A valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. This determination is assessed quarterly based on historical operating results, as well as projections of taxable income, which may be subject to change in the future. Current year changes to the Company’s valuation allowances are reflected in tax expense recorded for the three months ended March 31, 2026 and 2025, respectively.
The Company accrues interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
One or more of our legal entities file income tax returns in the U.S. and in certain foreign jurisdictions. Our income tax returns may be examined by tax authorities in those jurisdictions. Significant disputes may arise with tax authorities involving issues such as the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations and relevant facts. In the U.S., the statute of limitations remains open beginning with tax year 2017. We are currently under U.S. federal audit for tax year .
On July 4, 2025, the U.S. government enacted the Tax Act, which includes significant changes to various tax provisions previously enacted by the TCJA. The Tax Act makes permanent extension of certain expiring provisions of TCJA, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. We have reflected the impacts of provisions with 2026 effective dates into our provision for income taxes for the three months ended March 31, 2026. |
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